As someone who was there at the birth of the Local Government Association (LGA) in the 1990s, I have always been a fan, despite being aware of its limitations. Uniting all the various local government organisations into one national advocate was an impressive achievement and avoided the age old practice of central government playing one part of local government off against the other.

To paraphrase Oscar Wilde writing about a dog walking on its hind legs: it may have been ungainly, but it was impressive that it was doing it at all.

Throughout the LGA's history, there have always been threats of withdrawal by councils unhappy about a perceived lack of support for their specific concerns. This time it's more serious because the threats are coming from a Conservative government and a group of high-profile mainly Labour councils at the same time (which no doubt has got the conspiracy theorists tweeting merrily).

Part of the LGA's problem is that its most recent reorganisation changed it from a pure membership organisation to one that was dependent on government subsidy, or "top sliced funds". Previously, this was contained within the arm's-length Improvement and Development Agency (IDeA), which in the latter years of the Labour government had become a conduit for government monies. This was never going to be sustainable with a change of government but, rather like the banks and sub-prime mortgages, the previous leadership at the LGA simply merged the two organisations and continued to rely on government subsidy.

On top of that, the new government put the brakes on government funding, especially to local government, which increased the strains and tensions between all elements of the public sector, and placed a high premium on effective contacts and lobbying with central government. The Core Cities group of the eight English cities came up trumps.

With high-profile contacts such as Lord Adonis and Lord Heseltine, and a direct line into the Treasury, they were able to negotiate a series of city deals which saw a transfer of power and funding to city regions. As one member of the group said to me: "We have achieved this with one member of staff based in a office in Manchester. Just imagine what we could do with the £1m in LGA subscriptions."

This is a real threat; how the LGA leadership responds will determine its future. No doubt the organisation will receive lots of advice so here's a simple message from me. Concentrate on the three Ps: politics, peers and policy.

Politics

Over the next two years – in the run-up to the general election, and with the increasing prospect of another period of coalition goverment – politics will matter. The Core Cities group works well because it is made up of leaders who work on a leader and cabinet model. LGA political decision-making seems to be modelled on an old-fashioned county council with dozens of committees and process that makes electing a pope look speedy.

Ditch it and form your own version of a leader and cabinet from the 10 capable leaders nominated by party groups. The LGA needs to spot talent and invest in the next generation of local political leaders because no one else, especially political parties, appears to have any interest in doing so.

Peers

The abolition of the Audit Commission creates a gap for a performance or improvement agency for local government. You don't have to sit in the coffee rooms of local government for long to hear the names of a number of councils that are heading for the rocks in terms of performance. This would be a disaster for the sector as much as for the individual councils. Additionally, we need to ensure that innovation and best practice are more widely shared and remove the over-reliance on expensive private sector consultancies. The LGA should seek to create such an agency and ensure it has a rigorous system of peer-led reviews and performance monitoring. It has to be at arms' length to have credibility and with the right prospectus would attract government support. It must be tightly managed to avoid the "mission creep" that so damaged the IDeA in its final years. Neither is there any reason for such an agency to be based in London.

Policy

When it comes to policy, the LGA has to abandon its pretensions to be a mini Whitehall. It does need a smaller high calibre policy team, but one that acts as much as a clearing house for the work of other organisations such as the RSA, Policy Exchange and the Local Government Information Unit.

It must cease to be risk averse, both in terms of working with other organisations and trying to achieve consensus through bland policy statements. On the financial projections issued in last week's budget, local government spending will be reduced by 50% in the next five years. If we are not radical, local government will simply disappear. For example, why are we content to allow the continued ring-fencing of the NHS budget? The health sector has one of the worst records of productivity and engagement with the public. A lot of that money could be spent with local government involvement and influence.

The future

Can the LGA respond to this difficult challenge? The jury's out. As an organisation, it is drifting towards a change of political control in 2014, but with no clear sense of what that means.

The tragedy is that, now more than ever, we need a strong advocate for local government in all its forms. Hopefully, we will some signs of straight talking in time for the LGA Conference in Manchester in July.